To Stay or Go? Consumer Bank Switching Behaviour after Government Interventions

40 Pages Posted: 20 Mar 2017

See all articles by Maaike Diepstraten

Maaike Diepstraten

Tilburg University; De Nederlandsche Bank

Carin van der Cruijsen

De Nederlandsche Bank

Date Written: March 16, 2017

Abstract

We analyse whether and how individual savings and current accounts holders respond to government interventions at banks. We are the first to employ a difference-in-difference analysis, distinguish between a nationalisation and a capital injection, and separate between the two banking products. We find that the aggregate switching behaviour of consumers at intervened banks is similar before and after the troubles and intervention. This holds for both type of interventions, both type of products, and for switching from and to the intervened bank. However, we show heterogeneity in consumer responses to government interventions, depending on the type of intervention and banking product. For example, compared to consumers who trust the government, consumers with no or little trust are more likely to switch away from a bank after a nationalisation, relative to customers of the control bank. This holds for switching with the savings and current account. This highlights that trust in the government is an important prerequisite for a successful nationalisation. Second, responses depend on consumers’ level of risk aversion. Risk averse current account holders at a nationalised bank are more likely to switch away than customers of the control bank. This result indicates that interventions can make consumers more aware of the troubles the intervened bank faces, and result in an outflow of consumers if a large share is risk averse.

Keywords: consumer bank switching, bail-outs, capital injection, nationalisation, trust in the government, risk aversion

JEL Classification: D14, G21, G28

Suggested Citation

Diepstraten, Maaike and van der Cruijsen, Carin, To Stay or Go? Consumer Bank Switching Behaviour after Government Interventions (March 16, 2017). De Nederlandsche Bank Working Paper No. 550. Available at SSRN: https://ssrn.com/abstract=2937747 or http://dx.doi.org/10.2139/ssrn.2937747

Maaike Diepstraten (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Carin van der Cruijsen

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/index.jsp

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